RECP IV WG Land Investors LLC v. Capital One Bank (USA), N.A., Record No. 161506
| Decision Date | 05 April 2018 |
| Docket Number | Record No. 161506 |
| Parties | RECP IV WG LAND INVESTORS LLC v. CAPITAL ONE BANK (USA), N.A. |
| Court | Virginia Supreme Court |
Vivian Katsantonis (Christopher M. Harris ; Mitchell A. Bashur, McLean; Frank K. Friedman ; Erin B. Ashwell, Roanoke; Watt, Tieder, Hoffar & Fitzgerald; Woods Rogers, on briefs), for appellant.
Matthew A. Fitzgerald, Richmond (Michelle D. Gambino ; David Barger ; Michael A. Hass, McLean; John D. Wilburn ; Jennifer A. Guy, Tysons; Greenberg Traurig; McGuireWoods, on brief), for appellee.
PRESENT: Lemons, C.J., Goodwyn, McClanahan, Powell, Kelsey, and McCullough, JJ., and Koontz, S.J.
This case involves a dispute over contractual provisions in a real estate purchase agreement ("Agreement") allocating future development rights for properties located near a new Metro rail station in Tysons Corner. Appellant RECP IV WG Land Investors LLC ("WG Land") is an assignee of certain rights of the seller under the Agreement and appellee Capital One Bank (USA), N.A. ("Capital One") is the assignee of the purchaser. WG Land challenges the circuit court’s dismissal of its suit against Capital One instituted on allegations that Capital One breached the Agreement and certain related covenants by Capital One’s development of the property acquired under the Agreement. WG Land also challenges the court’s award of attorney’s fees to Capital One. Concluding there is no reversible error in the judgment of the circuit court, we affirm.
In 2000, WG Land’s predecessor, West*Group Properties, LLC ("West*Group"), subdivided an office park ("Office Park Property") in the Tysons Corner area of Fairfax County and sold approximately 29 acres of the park ("Capital One Property") to Capital One’s predecessor, Capital One Financial Corporation ("Capital One Financial"), pursuant to the terms of the Agreement and a related Supplemental Declaration and Restrictive Covenant ("Declaration"). At the time of the sale, the Office Park Property was subject to a numerical cap on the development density under Fairfax County’s Comprehensive Plan by the allocation of a maximum amount of floor area ratio ("FAR") for the properties in that area. FAR is the relationship between the total amount of a building’s usable floor area and the total area of the parcel upon which the building stands. For example, a FAR of 1.0 means the gross floor area of the building(s) must not exceed the area of the parcel, whereas a FAR of 2.0 means the gross floor area of the building(s) must not exceed twice the area of the parcel. Thus, with this cap on FAR in place, an allocation of more FAR for the Capital One Property meant that less FAR would be available for West*Group’s remaining parcels, and vice versa. FAR is commonly expressed in square footage and using that formulation, as set forth in the Agreement and recorded Declaration, West*Group transferred 1.1 million square feet of FAR to Capital One Financial from the total amount of FAR allocated for the Office Park Property by the County.
The parties included provisions in the Agreement and Declaration restricting Capital One Financial’s use and development of the Capital One Property. An eight-year restriction on Capital One Financial’s right to apply for additional FAR rights from the County was imposed. West*Group was also given the right to repurchase the Capital One Property if Capital One Financial sought to sell or lease it, including any FAR associated with it, within a ten-year period.
Furthermore, because the parties anticipated that the Metro rail system’s expansion would result in the County allowing more development density in the area, they included a specific mathematical formula ("FAR formula") to apportion between West*Group and Capital One Financial any additional FAR that might become "available" to the Capital One Property. Under this "shar[ing]" formula, Capital One Financial would receive the first 200,000 square feet of such FAR and the remainder would be fractionally divided between the two parties. The Agreement in § 28.7(b) and the Declaration in 4 contain identical language in setting forth the FAR formula. Significantly, the FAR formula incorporated a portion of Fairfax County’s 2000 Comprehensive Plan ("2000 Plan") entitled "Transit Station Areas," which specified the expected fixed amount of FAR that would be available to properties located around a new Metro rail station in Tysons Corner such as the Capital One Property and neighboring properties. Pursuant to the 2000 Plan, the FAR for the Capital One Property would range from 1.0 to 1.5 within what the FAR formula referred to as the County’s "Existing Metro Overlay" district.
In 2010, West*Group assigned its rights under the Agreement and Declaration to WG Land and transferred to WG Land ownership of the remaining parcels comprising the Office Park Property. WG Land immediately assigned and transferred the same to various special purpose entities of which WG Land was the majority owner. Those entities subsequently assigned their intangible rights under the Agreement back to WG Land, including the right to receive a portion of new FAR allocated to the Capital One Property. But those entities did not transfer title to their respective properties. Thus, WG Land does not hold title to any of the neighboring properties benefited by the Declaration ("Neighboring Properties").
Also in 2010, the County amended its Comprehensive Plan ("2010 Plan") with an "Amended Metro Overlay" district, which lifted the cap on FAR for properties located around the new Metro rail stations in Tysons Corner. More specifically, the Amended Metro Overlay provided that (Emphasis added.) Such areas included the Capital One Property and the Neighboring Properties owned by the above-referenced special purpose entities.
Capital One, as Capital One Financial’s assignee and the owner of the Capital One Property, subsequently filed rezoning requests with the County for additional FAR, and in 2012 received approval to develop an additional 3.8 million square feet of FAR on the Capital One Property, which was then the location of Capital One’s headquarters.1 Capital One thereafter began construction in furtherance of its plans approved by the County to use this additional FAR for expansion of its corporate campus and other mixed-use development of the Capital One Property.
WG Land, in 2015, filed suit against Capital One based on Capital One’s use of its additional FAR rights acquired from the County. The special purpose entities holding title to the Neighboring Properties did not join the suit. WG Land alleged that additional FAR became "available" under the terms of the FAR formula as a result of Capital One’s zoning requests, and that Capital One breached its obligations under the FAR formula in the Agreement and Declaration by developing the Capital One Property without allocating and conveying a portion of those FAR rights to WG Land. WG Land’s complaint set forth three counts, all of which were based on this alleged breach of contract. In Count I, WG Land sought a declaratory judgment that the FAR allocations in the Agreement and Declaration were enforceable and Capital One’s development activities violated the FAR formula governing those allocations. In Count II, WG Land sought a prohibitory injunction to preserve the status quo and a permanent injunction against the development of the Capital One Property in excess of the development rights granted under the Agreement and Declaration. In Count III, as an alternative to the injunction, WG Land sought $120 million in damages against Capital One for this alleged breach of the Agreement and Declaration.
For its response, Capital One initially filed a demurrer and plea in bar. Capital One asserted in the demurrer, inter alia , that WG Land’s request for declaratory judgment should be dismissed because WG Land was not simply requesting a declaration of the parties’ rights and obligations. Rather, WG land sought a finding that Capital One had actually breached the Agreement and Declaration by failing to allocate and convey FAR rights to WG Land. Having thus alleged a claim that had "accrued and matured," WG Land was not entitled to a declaratory judgment, Capital One argued.
In support of the plea in bar, Capital One asserted as one of its principal defenses that the changes in the County Comprehensive Plan in 2010 with the removal of the FAR cap through an Amended Metro Overlay defeated the purpose of the FAR formula and rendered it impossible to perform. Capital One argued that with this removal of the cap on development density for the Capital One Property and the Neighboring Properties, there was no basis for the Neighboring Properties to secure from Capital One an extra share of what was previously a maximum amount of development density rights for the area. Moreover, Capital One argued, the removal of the cap made the equations in the FAR formula impossible to calculate in the absence of a set number for a maximum FAR. Thus, according to Capital One, its performance under the FAR formula was excused by the doctrine of impossibility, thereby barring WG Land’s action against it.
Capital One also asserted in its plea in bar that property ownership was a requirement under the FAR formula, which expressly provided that FAR may only be "conveyed, allocated or otherwise made available to [West*Group or its successors], for their use in connection with properties now or then owned by them in the area." Because WG Land did not hold title to any of the Neighboring Properties, Capital One argued, WG Land had no contractual right, i.e.,...
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